Almanac

News - November 13, 2013

Lehman losses: County
settles for $5.2 million

by Renee Batti

San Mateo County will receive the lion's share of a $9.6 million settlement to be paid by a handful of former Lehman Brothers investment bank officers, but the county's $5.2 million portion represents only a sliver of the $155 million total loss suffered by public agencies in the county, including school districts, when the investment giant declared bankruptcy in 2008.

The settlement concluded a legal process begun in 2009 when eight plaintiffs, including San Mateo County and the city of Burbank, sued in federal court to recoup massive losses resulting from the bankruptcy. The lawsuit accused Lehman Brothers officers of intentionally misleading investors about the bank's risk-management policies, leverage and real estate holdings. Among the defendants were Lehman's chairman and CEO, the chief financial officer, the president and chief operating officer, and five former directors.

Among public agencies in the county that lost money were school districts, which were required to deposit their bond revenue and other working funds into the county's investment pool.

Among those hit hard were the Sequoia Union High School District, which lost about $6.5 million, and the Menlo Park City School District, which lost about $4 million. The Las Lomitas district lost almost $400,000, the Portola Valley district lost nearly $150,000, and the Woodside district, nearly $100,000.

As of late last year, the county had recovered about $15.2 million from asset distribution payments, County Counsel John Beiers told the Almanac in October 2012. The county expects to recover at least 22 percent in coming years, and "we're still hopeful it'll be somewhere between 25 percent and 30 percent of the total loss," Mr. Beiers said.

Staff from the county manager's office and the treasurer's office could not be reached to ascertain what the recovery figure is now.

The recovered funds are distributed proportionally among the county's agencies, based on their losses.

In addition to the $9.6 million pay-out to the eight plaintiffs, the settlement awarded the plaintiffs' attorney fees of nearly $1 million to Cotchett Pitre & McCarthy, according to Marshall Wilson, the county's communications director.